Whether you have significant wealth or just a few assets, your Estate Plan determines how those items are dispersed upon your incapacitation or death. It also ensures that your wishes are carried out without conflict or confusion.
It’s a good idea to review your estate planning documents periodically, even if nothing has changed. This will help prevent any surprises and unnecessary taxes. Read on for further insights into Estate Planning.
A will is the core of any estate plan and outlines your desires for how you want to leave behind your possessions, including your home, car, jewelry, art and more. It also names someone to oversee your affairs and care for any children you may have. In addition, a will can set forth your wishes for end-of-life decisions if you are terminally ill, such as whether to be removed from life support.
In addition to laying out your desired outcomes for your assets, a will can help you avoid unnecessary taxes. Various strategies can be used to minimize the amount of money lost to taxes, including trusts, charitable donations and more. Estate planning is not just for the wealthy, as everyone needs to set up a plan that takes into account their unique situation and family dynamics.
When putting together your will, you should take an inventory of all your assets to understand the value of your estate. This includes property, bank accounts, investments and retirement accounts. You should also make note of any debts, such as mortgages and credit card balances. In some instances, your debts can become part of your inheritance, so they must be paid off.
Once you know the value of your assets, you can begin to create a list of beneficiaries. These could include spouses, children, friends, relatives and even pets. You can decide if you want to give them all a lump sum or in installments. In addition, you can also specify specific instructions for each beneficiary, such as when and how to transfer the assets.
You should also include a letter of instruction, which is less formal than your will and can contain information such as account numbers and passwords. It can also specify your desired funeral arrangements. You can also appoint an executor to oversee your estate and carry out the instructions in your will.
Although it is possible to draft a will on your own, it’s best to work with an experienced attorney to ensure that the document is valid. It must be signed by at least two people of sound mind who know you well. It must also be dated and witnessed in order to be valid.
Trusts
When people think of trusts, they often envision them as tools for the ultra-wealthy. However, anyone can—and should—consider them as part of an estate plan. Trusts can help minimize estate settlement costs, provide assistance and support to a surviving spouse or children, protect assets from creditors, and leave a legacy of charitable giving.
The most basic estate planning document is a will, which lays out the way an individual’s property and children (if any) will be handled after death. A will typically names a guardian for minors, as well as specifies a method for distributing the estate’s assets.
While a will can be effective in some situations, it’s not the best option for everyone. If you own a large amount of property, a trust may be able to avoid probate altogether, saving your family time and money. A trust can also offer greater control over how and when assets are distributed, which can be helpful in complicated circumstances like multiple marriages, stepchildren, or heirs with different financial abilities.
A trustee manages a trust’s assets until they are distributed to the beneficiaries. The trustee is normally selected by the creator of the trust, known as the settlor or grantor. Depending on the type of trust, a trustee could be an individual, a bank, or an institution. A revocable trust is generally the most common type, as it can be changed during an individual’s lifetime.
Non-revocable trusts are not normally used as frequently, but can be beneficial for some individuals. For example, a special needs trust can be created for someone who receives government benefits like Social Security disability. The income generated by the trust can be used to supplement their care, without affecting or forfeiting the benefits.
When determining whether a trust is the right choice, it’s important to make a complete list of all your assets, including physical assets like real estate and sentimental items as well as investment accounts and bank accounts. Taking the time to tally up the value of all your assets can help you determine how much you need to save for future taxes and expenses. You should also consider how certain assets are titled. For example, if you have a beneficiary designated on an account, that will pass directly to that person upon your death and won’t be considered part of your estate.
Powers of Attorney
Powers of attorney (POA) are documents that grant someone else (called your agent) legal permission to act on your behalf in financial, legal, and medical matters. A POA is one of the most important components of estate planning and should always be set up with an experienced lawyer.
The agent you choose to appoint as a POA is known as an attorney-in-fact. A POA can allow your attorney-in-fact to manage your finances, create or amend trusts, transfer assets into a trust, and even take actions to carry out your wishes in a will. Depending on the specific type of power of attorney, you can also appoint co-agents to manage your affairs together.
When determining who to appoint as your agent, you should consider the person’s relationship with you and the people you have in common. The person should be a trustworthy individual and be willing to step into the role of decision maker for you if necessary. Many individuals appoint a family member to serve as their agent. However, if a family member is not willing to accept this responsibility or the responsibilities associated with it, then there are other options available for you.
There are six types of power of attorney: limited, durable, springing, revocable, and general. A limited power of attorney can be used for a specific purpose or for a certain period of time. A durable power of attorney remains in effect until you die, revoke it, or become incapacitated. A springing power of attorney takes effect when you become unable to make decisions for yourself. A revocable power of attorney allows you to change or revoke it at any time as long as you are mentally competent.
You can include a statement in your power of attorney that states whether or not you want your agent to be able to take care of your health. It is recommended that you do this, as it gives your agent clear guidance on what your healthcare preferences are in the event of incapacity. Additionally, you can also appoint a health care proxy to make healthcare decisions on your behalf.
Health Care Directives
Health care directives are the legal instructions that outline your wishes for medical treatment in the event you are not able to communicate them. The two most common health care advance directives are a living will and a durable power of attorney for health care. Each state has its own forms and requirements for these documents, so it is important to familiarize yourself with the laws of your specific state.
A lawyer can help you create these documents. But it is generally not necessary. You can find the appropriate forms from your state’s website or from organizations such as AARP and the American Bar Association. The forms typically need to be signed and witnessed or notarized, depending on your state’s law. Once you have completed your health care advance directives, it is a good idea to give a copy to your doctor and to the person you name as your health care agent. You should also keep a record of who has copies. You can change or cancel these forms at any time by revoking them, but you must notify those who have copies — either orally or in writing — of the change.
One major benefit of creating healthcare directives is that they help your family members understand your preferences and can reduce family conflicts and feelings of guilt during a crisis. It can also allow for transparent communication with doctors and may offer flexibility in cases where you have unique medical conditions.
Discussing your end-of-life medical care with loved ones is difficult, but it is essential so that your medical wishes are respected if you can’t speak for yourself. An experienced estate planning attorney can assist you in preparing these documents and ensure that they are valid in your state. They can also help you create a document that allows you to travel to other states without having your advanced directives revoked or invalidated by the new jurisdiction’s laws. It is also important to include a HIPAA release form in your advance directives so that your designated agent can access your medical records.